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Ohio House begins hearings on new bill to regulate sweepstakes parlors (VIDEO)

Columbus -- Lawmakers who oppose sweepstakes parlors have relaunched efforts to shutter the unregulated storefronts, with quick pushback from one conservative group that says the proposed legislation is unconstitutional.

The Feb. 13 testimony on House Bill 7 before the Ohio House's Policy and Legislative Oversight Committee was largely a repeat of deliberations late last year, with sponsoring Rep. Matt Huffman, a Republican from Lima, and GOP Attorney General Mike DeWine saying law changes are needed quickly to stop the further proliferation of private, for-profit gambling.

DeWine called them "mini-casinos" and "a consumer ripoff."

"Unlike any other form of legal gambling in this state, no one knows what the payoff is …The games are operated by people we don't know …," he said. "These sweepstakes parlors are ripe for organized crime and for money laundering. We don't know where the profits go. Certainly none of the money goes to state and little if any of it's likely to go to charity either."

"I don't want anybody to misunderstand this," Huffman said. "As painful as this is for me to say or for us to hear, this bill will by and large put most of the entities we call sweepstakes parlors out of business. That's what's going to happen if we enact this legislation. I don't want to be unclear about that."

The legislation focuses on what have commonly been called Internet Cafes, though the businesses are not the typical coffee shops where customers go to read email or browse websites. Generally, patrons purchase phone cards upon entering, buying a chance to win sweepstakes prizes and using computers that resemble slot machines.

More than 800 of the businesses have registered with DeWine's office to date, though lawmakers instituted a yearlong moratorium blocking the opening of new locations.

House Bill 7 largely mirrors the legislation that passed the Ohio House late last session but stalled in the Senate. It would require sweepstakes parlors to register with the attorney general's office, with additional regulations to be developed. The storefronts would be banned from offering cash payouts or merchandize prizes worth more than $10. There would be criminal penalties against those that violate the law.

"We are not saying that sweepstakes are illegal gambling," he said. "… No one goes into McDonald's, at least not very many people, and spends $5,000 on hamburgers so they can pull little tickets off and see if they won money … There are a lot of people going [into sweepstakes parlors] saying, 'Here's my money for my phone cards,' and they're seeing how much money they can win."

DeWine said storefronts that opened over the past two years despite his office's warning about legal issues were like "pigs at a trough," taking advantage of a loophole in state law to earn as much money as they could while it lasts.

"They are making so much money, you cannot believe how much money they're making" he said.

Sweepstakes parlor owners and advocates packed legislative hearing rooms during deliberations on the legislation last session, and they're indicating they're ready to continue to do so to counter the new bill.

"Let me be it clear, the sweepstakes association [is] willing to be regulated," said Luther Liggett Jr., a Columbus attorney representing cafe owners. "But as Rep. Huffman made it clear, he wants to put them out of business, and that's where we differ."

The conservative 1851 Center for Constitutional Law released a 12-page paper Feb. 13 outlining its issues with the bill, notably that the proposed regulation would "destroy over 800 politically weak small businesses."

Attorney Maurice Thompson wrote, "It's relatively easy to dogmatize Internet cafes. However, failure to stand on principle in this dispute between business competitors creates a slippery slope, transmitting the message to business and industry, lobbyists and citizens that the codification of business advantages can be won at the Statehouse, rather than earned by attracting voluntary business. This would only inviting further lobbying to accomplish these ends. Today's internet cafes could be tomorrow's manufacturers, farmers, oil and gas producers, restaurants, or retail shops."

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.